A district court in California joined a growing number of other courts in finding that Google may not hide behind the “ordinary course of business” exception found in the Electronic Communications Privacy Act (“ECPA”), 18 U.S.C. §§ 2510, et seq., to scan its users’ emails with impunity.

According to the plaintiffs in In re: Google Inc. Gmail Litigation, No. 13-md-02430, since approximately 2008, Google has intercepted and read the content of all emails that were sent or received by users of its free email service, Gmail, for the purposes of sending an advertisement relevant to that email communication to the recipient, sender or both.

The plaintiffs further alleged that the process by which Google intercepted and read its users’ emails occurred and was conducted separate from Google’s other email processes, including spam and virus filtering.

The plaintiffs claimed that Google was in violation of the ECPA, which generally prohibits the interception of “wire, oral, or electronic communications” and provides a private right of action against any person who “intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication.” 18 U.S.C. § 2511(1)(a).

The law defines “intercept” as “the aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other device.” Id. at § 2510(4).

Google argued that there was no interception because, under the “ordinary course of business” exception, “any telephone or telegraph instrument, equipment or facility, or any component thereof . . . being used by a provider of wire or electronic communication service in the ordinary course of its business” falls outside of the definition. 18 U.S.C. § 2510(5)(a)(ii).

However, the Court rejected Google’s reasoning, finding that the ECPA exception should not be interpreted so broadly as to permit the company to do anything it wished with its users’ data.

The exception should be interpreted narrowly. The Court specifically found that the exception is designed only to protect electronic communication service providers against a finding of liability under the law where the interception facilitated or was incidental to provision of the electronic communication service at issue.

Because the plaintiffs had plausibly alleged that Google intercepts its users’ emails for the purpose of creating user profiles and delivering targeted advertising, processes which are not instrumental to Google’s ability to transmit emails, the Court denied Google’s motion to dismiss plaintiffs’ claims.

On March 19, 2013, Justice van Rensburg of the Ontario Superior Court of Justice issued an important decision relating to overlapping class action proceedings against IMAX Corporation (“IMAX”) that are currently pending in the United States and Ontario, Canada. In the opinion, the Ontario Court recognized a U.S. class action settlement with IMAX, which has already been approved by a U.S. Court and amended its previous decision certifying a “global” class of investors that acquired IMAX shares on both the NASDAQ and TSX stock exchanges. See Silver v. IMAX Corporation, 2013 ONSC 1667 (March 19, 2009, Sup. Ct. J.). A copy of the Order can be found here. The Canadian decision is significant for practitioners involved in parallel securities class actions in the United States and Canada.

Background to the IMAX Parallel U.S. and Canadian Proceedings

In August 2006, IMAX announced that it was in the process of responding to an informal inquiry from the Securities and Exchange Commission concerning the timing of revenue recognition, and specifically, its application of multiple element arrangement accounting to revenue derived from theater system sales and leases. This disclosure severely impacted the value of IMAX’s stock which dropped by approximately 40% following the announcement. At that time, IMAX was incorporated under the laws of Canada, duly headquartered in Canada and New York and held a dual-listing on the NASDAQ and TSX stock exchanges.

Following the announcement of the SEC’s investigation, class action lawsuits were commenced in the United States District Court for the Southern District of New York (“U.S. Court”) alleging that IMAX and other defendants made material misrepresentations and omissions regarding revenue recognition for theater systems in violation of the federal securities laws. The U.S. actions were not the only proceedings triggered by the disclosure of IMAX’s revenue recognition issues. On September 20, 2006, following the filings of the U.S. class actions, a parallel class action lawsuit captioned Silver v. IMAX Corporation, Court File No. CV-06-3257-00, was filed in the Ontario Superior Court of Justice, Canada (the “Canadian Action”) against IMAX and other defendants alleging, based on substantially identical facts to those alleged in the U.S. actions, that IMAX made material misrepresentations and omissions regarding revenue recognition for theater systems.

After the U.S. actions were consolidated, an amended complaint was filed against the defendants by the lead plaintiff in the U.S. Court. After briefing by the parties, on September 15, 2008, the defendants’ motions to dismiss were denied by the U.S. Court. See In re IMAX Sec. Litig., 587 F. Supp. 2d 471 (S.D.N.Y. 2008). Shortly after discovery commenced in the U.S. Action, the lead plaintiff moved for class certification (seeking a global class of investors). However as a result of the Second Circuit’s decision in W.R. Huff Asset Management Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100 (2d Cir. 2008), several procedural issues surfaced that complicated and derailed the progress in the U.S. Action. In the intervening time period, the Canadian Action started progressing more rapidly and the parties completed class certification discovery and submitted briefing on plaintiffs’ motion for certification of a global class.

On December 14, 2009, the Canadian Court certified the Canadian Action on behalf of investors worldwide who acquired IMAX’s common stock on the NASDAQ or Toronto Stock Exchange. See Silver v. IMAX Corporation, [2009] O.J. No. 5585, 2009 ON.C. LEXIS 4847 (Dec. 14, 2009, Sup. Ct. J.). The certified class in the Ontario proceedings was defined as: “All persons, other than the Excluded Persons, who acquired securities of IMAX during the Class Period on the TSX and on the NASDAQ on or after February 17, 2006 and held some or all of those securities at the close of trading on August 9, 2006.” At the time, the Canadian order certifying a “global class” of IMAX investors was unprecedented in Canadian class action procedure.

The U.S. class action was able to get back on track and by November 2011, the parties in the U.S. Action commenced settlement negotiations and reached a final settlement agreement in March 2012. In light of the Supreme Court’s decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), the settlement class included only those who “purchased or otherwise acquired IMAX shares on the NASDAQ from February 27, 2003 through July 20, 2007” and excluded those who purchased IMAX stock on the Toronto Stock Exchange. In order to address the overlap between the U.S. class and Canadian class (overlapping class members are those who purchased or acquired their IMAX shares on the NASDAQ between February 17, 2006 and August 9, 2006) the settlement agreement was conditioned on the entry of an order in the Canadian Action that excluded from the Canadian class any investor who did not opt out of the U.S. class (the “Canadian Order”). If the Canadian Order was not granted, the settlement would not proceed and the parties to the U.S. Action would revert back to their previous litigation positions.

After the U.S. Court preliminarily approved the settlement on March 28, 2012, the IMAX defendants made a motion to the Canadian Court to amend the “global” class definition to exclude from the certified Canadian class all persons who would be bound by a final judgment in the U.S. settlement.

On April 27, 2012, notice was published in the U.S. Action. The U.S. notice described the parallel U.S. and Canadian class actions, noted the differences in the proceedings and advised all class members (i.e. those who purchased or otherwise acquired IMAX shares on the NASDAQ between February 27, 2003 and July 20, 2007) of their right to remain in the class in the U.S. Action and be eligible to claim their settlement compensation, or to opt-out, and pursue their own individual action, or opt-out and elect to remain instead in the class in the Canadian Action (i.e. those who purchased IMAX securities on the NASDAQ on or after February 17, 2006 and held some or all of those securities on August 9, 2006). Presumably overlapping class members would opt-out of the U.S. settlement and choose to remain in the Ontario class if they thought that they would receive a better recovery in the Canadian Action. If an overlapping class member did not opt out of the U.S. Action, they would automatically be bound and deemed to be a member of the class in the U.S. Action and excluded from the Canadian Action.

A fairness hearing to consider the final approval of the U.S. settlement was held in the U.S. Court on June 14, 2012, resulting in an Order dated June 20, 2012 (the “U.S. Fairness Decision”) determining that the U.S. settlement was fair, reasonable and adequate and in the best interests of the U.S. class. In re IMAX Sec. Litig., No. 06-6128 (S.D.N.Y. June 20, 2012). Although the U.S. settlement was approved, finality of the settlement is contingent on the Canadian Court amending the class definition and the Canadian Order becoming final and unappealable.

The Canadian Court’s March 19, 2013 Order

Approximately a year after the defendants made their motion to the Ontario Court to amend the global class definition, on March 19, 2013, Justice van Rensburg issued a detailed opinion granting the motion. In granting the defendants’ motion, Justice van Rensburg first determined that under Sections 5(1)(d), 8(3) and 10(1) of the Ontario Class Proceedings Act, 1992, S.O. 1992, c. 6, the Ontario Court had authority to amend its previous order certifying a “global” class. Justice van Rensburg noted in the opinion that her original decision to certify a global class “contemplated [ ] that this issue could be revisited depending on what occurred in the parallel U.S. proceedings.” Silver, 2013 ONC 1667, para. 67.

As part of her consideration to amend the certified global class, Justice van Rensburg determined that the Court needed to recognize the U.S. Fairness Decision and consider whether the Canadian Action remained the “preferable procedure” for resolving the claims of overlapping class members who did not opt out of the U.S. Settlement. Silver, 2013 ONC 1667, para. 83-85. When determining the issue of recognition, the Court applied the factors from the Canadian Court of Appeal’s decision in Currie v. McDonald’s Restaurants of Canada Ltd., (2005), 74 O.R. (3d) 321 (C.A.).

After applying the Currie analysis, Justice van Rensburg concluded that the test had been satisfied to formally recognize the U.S. Fairness decision because (i) there was a “real and substantial connection” with the claims of the overlapping class members and the U.S. Court; (ii) overlapping class members were accorded procedural fairness (including adequate notice) by the U.S. Court; and (iii) the overlapping class members’ rights were adequately represented by an appropriate lead plaintiff representative and U.S. class counsel. Silver, 2013 ONC 1667, para. 105-133. In granting defendant’s motion to amend the class definition, Justice van Rensburg stated:

I have applied the factors from the Court of Appeal’s decision in Currie with respect to when a decision of a foreign court purporting to settle claims of class members that are the subject of parallel proceedings in Ontario, will be given preclusive effect. Having determined that the U.S. Court has a “real and substantial connection” with the claims of the overlapping class members, I have considered whether there was procedural fairness in the treatment of such claims (including the adequacy of notice and representation in the proceedings). Having found that the U.S. Settlement should be recognized, I have considered all of the circumstances, including the current status of these proceedings, before concluding that the Ontario Action is no longer the ‘preferable procedure’ for the determination of the claims of class members whose claims are covered by, and who have not opted out of, the U.S. Settlement. The class definition in these proceedings is amended accordingly.

Silver, 2013 ONC 1667, para. 18.

In opposition to the defendants’ motion, Canadian plaintiffs’ counsel had argued that the U.S. settlement was insufficient, unfair and that granting defendants’ motion would “rip the guts out” of the pending Canadian Action. Silver, 2013 ONC 1667, para. 7. In response to that argument, Justice van Rensburg appropriately observed that:

It is not the function of this court to seek to jealously guard its own jurisdiction over a class proceeding that has been certified here. Such an approach is inconsistent with the principles of comity. It is also not the function of the court to favour or protect the interests of class counsel within this jurisdiction, knowing that they have invested time and resources into the litigation, and that their compensation will depend on the size of the judgment or settlement they are able to achieve. As I have already noted, class action counsel assume significant risks, including the potential that the court may certify a smaller class than that requested. In pursuing an action when there are existing parallel proceedings in another jurisdiction, class counsel are aware that the other action might move more quickly or reach a determination before their own case is decided or resolved.

Id. at para. 179.

As a result of the Canadian Court’s decision, the Canadian class will now be comprised almost entirely of only those who purchased IMAX stock on the TSX. The certification order dated December 14, 2009 was amended to define the new Canadian certified class as:

All persons, other than Excluded Persons, who acquired securities of Imax during the Class Period on the TSX and on NASDAQ, and held some or all of those securities at the close of trading on August 9, 2006 (the “Class Members”).

“Excluded Persons” means Imax’s subsidiaries, affiliates, officers, directors, senior employees, legal representatives, heirs, predecessors, successors and assigns, and any member of the defendants’ families and any entity in which any of them has or had during the Class Period a legal or de facto controlling interest and all NASDAQ purchasers during the Class Period who did not deliver an opt out notice in the U.S. class action In re IMAX Securities Litigation, Civil Action No. 1:06-cv-06128 (S.D.N.Y.).

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm. As lead counsel in the IMAX U.S. class action, we are extremely pleased with the decision from the Ontario Court. The plaintiffs in the Canadian Action are currently in the process of appealing Justice van Rensburg’s March 2013 Order. The decision to grant the defendant’s motion to amend the class will permit the U.S. settlement to be concluded and payments to eligible claimants will proceed once the Canadian Order becomes final and unappealable.

Memorial Day was officially proclaimed on May 5, 1868 by General John Logan, national commander of the Grand Army of the Republic and was first observed on May 30, 1868, when flowers were placed on the graves of Union and Confederate soldiers at Arlington National Cemetery. The first state to officially recognize the holiday was New York in 1873.

Memorial Day often marks the start of the summer vacation season and Labor Day its end. But did you know that on Memorial Day the flag is raised briskly to the top of the staff and then solemnly lowered to the half-staff position, where it remains only until noon. It is then raised to full-staff for the remainder of the day. The half-staff position remembers the men and women who gave their lives in service of their country. At noon their memory is raised by the living, who resolve not to let their sacrifice be in vain, but to rise up in their stead and continue the fight for liberty and justice for all.

To help remind Americans of the true meaning of Memorial Day, the “National Moment of Remembrance” resolution was passed in 2000 and signed by President Clinton which asks that at 3 p.m. local time, for all Americans “To voluntarily and informally observe in their own way a Moment of remembrance and respect, pausing from whatever they are doing for a moment of silence or listening to ‘Taps.’”

In Orgill v. Ingersoll-Rand Company, a New York Supreme Court justice granted class certification to a group of current and former sales representatives who alleged that the defendants violated New York Labor Law Section 193 by making unlawful deductions from their wages.

Specifically, the plaintiffs alleged that their employer deducted 4.762% of their wages to cover the employer’s operating expenses, and deducted an additional $50 “computer charge.”

The defendants attempted to convince the judge that individual issues would predominate at trial—thus defeating class certification—because each salesperson could have “impliedly agreed” to a different compensation arrangement. The court rejected this argument, however, and noted that the defendants paid each salesperson according to a standard schedule set by the defendants.

A Brief Background on Unlawful Deductions

Under the New York Labor Law, an employer may only take certain, limited deductions from an employee’s paycheck. Those deductions are listed in Section 193 and, as a general matter, consist of deductions that are for the benefit of the employee. These deductions include contributions to pension plans, union dues, money to pay for discounted travel costs (for instance, Transitchek), gym membership dues, or 401(k) contributions.

An employer may not deduct expenses for the purpose of minimizing the employer’s risk. For instance, one court held that an employer’s $3,000 deduction from an employee’s wages due to a customer’s failure to pay the employer was a violation of the law. Similarly, a bakery cannot deduct the cost of stale good from its employee’s paycheck.

New York is not the only state that prohibits certain types of deductions from workers’ pay. Keep an eye on this blog; in upcoming weeks we’ll write about the wage deduction laws in other states.

In Frazier v. Castel Ford, Ltd., 2013 WL 265072 (January 24, 2013), the Maryland Court of Appeals put the brakes on a tactic that has gained favor among defendants in class actions—and that has caught the attention of the Supreme Court, for better or for worse—where a defendant attempts to moot the claims of a potential class representative by paying his damages in full at the outset of the case. This tactic is referred to as “picking off” the class representative. The court in Frazier held that an attempt to pick off the class representative cannot moot a class action, at least where the plaintiff has not had a “reasonable opportunity” to move for class certification.

Picking off the class representative benefits defendants because they can get out of a class action for the small amount they owe to the class representative (usually a single person), whose claims are typically very small on an individual basis. This tactic, however, is particularly dangerous because it allows a defendant to thwart the claims of the proposed class, who may never bring their own actions. Recognizing these principles, the Maryland Court of Appeals held that a defendant cannot defeat a class action by tendering all of the plaintiff’s damages—he must at least be given a “reasonable opportunity” to move for class certification, “including any necessary discovery.”

In Frazier, the plaintiff alleged that the defendant, a Ford dealer, misrepresented the expiration date of his extended warranty by two years. The plaintiff’s complaint asserted two causes of action—one for violation of Maryland’s Consumer Protection Act, and one for common law fraud. The plaintiff alleged that he incurred unexpected repair costs that he would not have paid if the warranty lasted as long as the dealer represented.

After plaintiff commenced his action and began to take discovery, the defendant sent him a check for all the damages it claimed he was owed. Thereafter, the defendant moved for summary judgment and made a motion to deny class certification. The trial court granted the defendant’s motion for summary judgment on the grounds that the plaintiff’s complaint was mooted by the tender of his damages, and granted the motion to deny class certification because the plaintiff, who had now purportedly been made whole, was not a member of the class he sought to represent.

The Maryland Court of Appeals reversed. The court noted that the concept of mootness is more flexible in a class action than in an individual case. The reason for this relaxed mootness standard, the court elaborated, was illustrated by the defendant’s actions: before filing his class action complaint, the plaintiff contacted the dealership and was ignored; the court stated that the defendant made “no effort to rectify the situation until the class action complaint was filed.” Then, once the complaint was filed, the defendant “immediately took action to moot it by tendering individual damages to the plaintiff . . . before the plaintiff had any reasonable opportunity to seek class certification or to conduct discovery addressed to the merits of class certification.”

The court noted that, if this type of behavior were permitted:

“[M]any meritorious class actions will never get off the ground. It will be particularly tempting to ‘pick off’ a putative class representative in cases where the underlying conduct affected many people but each claim, including the class representative’s, is small or moderate in size—a type of case for which the class action procedure was devised.”

The court noted that other jurisdictions—including the Ninth Circuit and the Third Circuit—had come to the same conclusions, based on substantially similar reasoning.

One practice pointer from this case: the court did not hold that a tender of damages fails to moot a class action in any and all circumstances. Rather, the court made clear that a class representative cannot be picked off “if the individual plaintiff has not had a reasonable opportunity to seek class certification, including any necessary discovery.” The court held that the lower court, on remand, could determine whether the plaintiff had an “adequate opportunity to file a timely motion for class certification” and, if so, could permit him to move for class certification.

The anniversary of the March 25, 1911 Manhattan Triangle Waist Factory fire is generating a good deal of discussion in the media, as it should. While the story is familiar to many people, particularly those who fight for employee rights, it is not only a reminder of the progress we have made in worker protection, but the need for employee protection to remain in the public eye.

The Triangle Waist Company made its owners rich, primarily through the exploitation of their approximately 500 primarily female immigrant employees, many of whom were 13 or 14 years old and worked long hours, six days each week. 146 of those employees were killed in the fire which exposed the dangerous work conditions that existed in innumerable multi-story factories. As a result, New York and other cities passed a number of laws aimed at addressing the physical safety issues presented.

Interestingly, two years before the fire, shirtwaist workers around the New York area went on strike to obtain better pay, improved working hours and union recognition. While some of those companies acceded to their employees’ demands, Triangle did not. Whether any of those changes would have avoided the fire or resulted in fewer deaths is unknown. What we do know is that employee rights remain as important today as they were in 1911. Each of us is undoubtedly aware of more than one situation in which employees are being unfairly or unlawfully treated, despite the federal and state laws that exist for their protection. Unionization in Wisconsin and Indiana has become a lightening rod for discussion, but that is hardly the only issue American workers face. This country has operated under certain core concepts which include an honest day’s work for an honest day’s pay and fair treatment for all. When we fail to protect our workers, we have cheated everyone.

These days, it seems you need a law degree to follow baseball–Barry Bonds goes on trial soon, as does Roger Clemens, the Mets’ Francisco Rodriguez got in trouble last year….just to name a few.

And now comes a lawsuit brought against the New York Yankees’ Triple A affiliate by Brian Bonner, a/k/a “Champ” the mascot. Mr. Bonner claims that, in addition to his administrative duties with the Scranton/Wilkes-Barre Yankees, he also worked as Champ and put in as many as 80 hours a week. And in return the team paid him a salary of $22,000, classified him as a “manager”, and did not pay him time and a half for hours worked over 40 per week. Mr. Bonner claims that he was misclassified and is not a manager. He therefore claims that the team’s failure to pay overtime was a violation of the Fair Labor Standards Act.

If Mr. Bonner is correct that he was misclassified as a manager, the team has some explaining to do. How, exactly, can a mascot be a manager? And, although the New York Times reported that the team disputes the allegations, the team’s website favors Champ: he is quoted as saying that, since joining the team in July, 2010, “I’ve been the hardest working Yankee in the farm system.”

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